High-Grade NPI Prices Rebound After Bottoming Out, Intensified Tug-of-War Between Sellers and Buyers in the Market [SMM Analysis]

This week, the high-grade NPI market experienced a significant price rebound. The average price of 8-12% high-grade NPI was 935.9 yuan/mtu (ex-factory, tax included), up by 1.6 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index also increased by $0.2/mtu WoW. This price recovery was mainly attributed to various market factors.

Supply side, the domestic market was affected by the rainy season in the Philippines, leading to firm nickel ore prices and higher production costs for high-grade NPI, compressing smelters' production margins, with some producers starting to cut production slightly. Meanwhile, the Indonesian market showed different dynamics: some medium-sized smelters reduced production, while large top-tier enterprises continued to expand capacity. With the addition of new capacity, Indonesia's high-grade NPI supply increased slightly compared to December.

Demand side, as the Chinese New Year holiday approached, trading activity in the stainless steel market decreased. Coupled with seasonal maintenance at stainless steel mills, demand for high-grade NPI declined. However, some traders remained optimistic about the market outlook, leading to a slight improvement in market sentiment. Although transaction prices hit recent lows, the proportion of long-term agreements with steel mills expanded, resulting in relatively tight availability of high-grade NPI in the market. Prices are expected to rebound in the short term.

Additionally, the discount of high-grade NPI to refined nickel widened to 339.65 yuan/mtu this week, an increase of 30.55 yuan/mtu WoW. This reflected the bottoming-out trend in high-grade NPI market prices.

From a macroeconomic perspective, US jobless claims exceeded expectations, and combined with easing inflation data, the US Fed's hawkish stance softened. Market expectations for an interest rate cut in H1 began to rise. Against this backdrop, uncertainty in the non-ferrous metals market increased.

In the refined nickel market, supply decreased slightly MoM, but downstream sectors such as alloy producers actively restocked ahead of the Chinese New Year, improving the fundamentals. This further supported the upward trend in nickel prices. LME nickel inventory, after experiencing a buildup, began to show signs of destocking, which also drove nickel prices higher. Meanwhile, the ongoing tight supply of Indonesian nickel ore further contributed to the nickel price rebound.

Short-term market outlook, driven by bullish sentiment, high-grade NPI prices are expected to continue rising, although weak downstream demand will limit the growth. Additionally, refined nickel prices may continue to climb due to international political factors. Overall, the price gap between high-grade NPI and refined nickel is likely to widen further, while smelters' losses have already eased this week.

On the raw material side, auxiliary material prices dropped back slightly this week, especially coke prices, which continued to decline due to weak downstream demand. On the nickel ore side, affected by the rainy season, shipments from the Philippines were limited, trading was sluggish, and nickel ore prices remained stable. Looking ahead to the coming week, auxiliary material prices are expected to remain stable ahead of the Chinese New Year, while nickel ore prices show no significant downward trend. High-grade NPI prices may continue to recover, driven by traders' pre-holiday restocking, and smelters' losses are expected to ease further.

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